Thoughts From the Frontline, August 2001

This will be an unusual e-letter in that I am going to focus on some recent interviews with well respected investment analysts or economists. I believe you will find them as instructive and thought-provoking as I did. I will quote them directly and then make comments.

The first is from Barron's with Jeremy Grantham. Grantham is a very highly respected money manager and analyst. His firm manages $22 billion. There are many in the investment industry who hold Grantham in almost guru status....

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Last December I wrote you a letter telling you that those of us who fly in economy class were worried about a bumpy landing. We kept hearing about a soft landing, but the ride was getting rough. The passengers back here in coach class are getting real nervous. Now, we would just as soon forget about attempting to land. We would rather see the plane start to take off again.

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This is a slightly longer than normal e-letter. I have put a lot of thought into this week's letter, and lay out a case as to why we are at a very critical juncture. Serious investing requires serious study. Simply making predictions with no rationale is useless and potentially harmful. In this issue, I make more than a few predictions. This should be a very useful letter for investors. I hope you find it helpful.

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First off, I want to stop the rumors that I had anything to do with the wording in this week's release of the Beige Book from the Fed. They used words like: "slow growth", "sluggish", "below expectations", "weak demand", "loosening labor markets" and "pronounced reductions in consumer borrowing". The fact that I have been writing the above for months is mere coincidence. Or it may be due to the fact that even the Fed has to recognize the problems.

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Today we learned that unemployment has held steady at 4.5% for the month of June. I happened to be watching TV as the announcement was made, and immediately I learned from the resident cheerleader that this was good news as it signals that we are poised for a turn-around in the economy.